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[2010] ZASCA 62
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AMI Forwarding (Pty) Ltd v Government of the Republic of South Africa (Department of Customs and Excise) and Another (251/09) [2010] ZASCA 62; [2010] 4 All SA 347 (SCA); 72 SATC 268 (3 May 2010)
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
:
251/09
In the
matter between:
AMI
FORWARDING (PTY) LIMITED Appellant
and
GOVERNMENT OF THE REPUBLIC OF SOUTH
AFRICA (DEPARTMENT OF CUSTOMS AND EXCISE) First Respondent
STANDARD GENERAL INSURANCE COMPANY
LIMITED Second Respondent
Neutral citation:
AMI Forwarding (Pty) Ltd v SARS and
another (251/09)
[2010] ZASCA 62
(3 May 2010)
Coram:
Mthiyane,
Lewis, Bosielo and Leach JJA and Griesel AJA
Heard: 15
March 2010
Delivered: 3 May 2010
Corrected: 3 May 2010
Summary:
Liability under ss 18 and 18A of the Customs and
Excise Act 91 of 1964: whether clearing and forwarding agent had
proved that it
was not liable for payment of duties.
______________________________________________________________
ORDER
______________________________________________________________
On appeal from:
KwaZulu-Natal
High Court (Durban) (Hassim J sitting as court of first instance):
1 The appeal is upheld with costs including those of two counsel
where so employed.
2 The order of the high court is replaced with the following:
‘(a) The plaintiff is not liable to pay to the first defendant
any of the customs duties and other charges reflected in Annexure
B
to the particulars of claim.
(b) The first defendant is to pay the costs including those
occasioned by the employment of two counsel.’
JUDGMENT
LEWIS JA (Mthiyane, Bosielo and Leach JJA and Griesel AJA concurring)
[1] The appellant, AMI Forwarding (Pty) Ltd (AMI), was a clearing and
forwarding agent for the import and export of goods from
South
Africa. It was a subsidiary of a company based in Antwerp, Belgium.
This appeal concerns its liability for duties on goods
cleared by it
for export in bond or export in transit over the period from November
1990 to May 1998. It ceased its business operations
in South Africa
in the middle of 1998.
[2] In October 2000 the first respondent, the
Commissioner
1
for the South African Revenue Service (SARS) (cited in this matter as
the Government of the Republic of South Africa (Department
of Customs
and Excise)) demanded that AMI pay duties in the sum of R331 352.84
in respect of three bills of entry listed in a schedule
to the
demand. The basis of this demand was that the bills of entry had been
falsely acquitted. I shall deal with this demand in
respect of the
allegedly false acquittals last.
[3] In May 2001 SARS made a second demand for payment in the sum of
R11 488 613.16 in respect of 68 bills of entry listed in an
attached
schedule, alleging that the bills of entry in respect of the goods
in question had not been acquitted. In October 2002
a third demand
was made, but this time it was in respect of 49 bills listed in the
second demand, an employee of SARS having found
the acquittals in
respect of 19 of the bills of entry referred to in the second demand.
The schedule to the third demand constitutes
Annexure B to the
particulars of claim. The reduced amount claimed was R5 903599.96 and
related to transactions concluded during
the period 15 September 1995
to 11 September 1996.
[4] AMI maintained that all the bills of entry in the second demand
had indeed been acquitted. But it could not locate the acquittal
documents years later, in part because it had merged with another
company, Micor Shipping, and premises had been changed and documents
lost, and partly because it had ceased trading in South Africa and
documents had been destroyed. A third factor was that AMI had
been in
regular contact with SARS officials about outstanding duties, and had
handed much of its documentation to its attorney,
who had absconded
at the time when the demands in issue were made.
[5] AMI had given as security for its statutory obligations (which I
shall discuss later) three bonds: a general bond, number 210724,
in
the sum of R10 000, dated 17 May 1991; a special removal bond, number
202906, in the sum of R375 000, dated 17 May 1991 (for
the removal in
bond of goods outside of South Africa); and a special removal bond,
number 202907 in the sum of R2m. This also secured
payment of duties
in respect of the removal of goods from Durban Harbour, or from SA
Container Depots, by road to a destination
outside South Africa.
[6] In March 2003 AMI instituted action for an order declaring that
it was not liable to pay SARS any of the customs duties demanded.
These were in respect of the allegedly falsified acquittals and the
bills of entry which were the subject of the third demand.
It also
sought an order that SARS was not entitled to call up payment against
any of the bonds furnished by it, and guaranteed
by the second
respondent, Standard General Insurance Company Ltd. (The latter did
not defend the action since its obligations are
dependent on the
liability of AMI.) SARS defended the action, but gave an undertaking
to AMI that it would not draw down on the
bonds pending the
finalization of the action.
[7] The action was dismissed by the KwaZulu-Natal High Court, Durban,
Hassim AJ finding that AMI had not proved that it had acquitted
the
bills of entry in respect of the third demand, and that the
acquittals forming the basis of the first demand had been falsified.
She gave AMI leave to appeal to this court.
[8] Numerous issues were traversed in the pleadings, the evidence,
the judgment of the high court and in heads of argument. I shall
allude to them briefly. But at the hearing of the appeal counsel for
AMI abandoned one of the legal arguments which it had relied
on in
the high court and argued the matter principally on the basis of
inferences to be drawn from the facts proved.
[9] Liability for the payment of customs duty is imposed on a
clearing agent such as AMI by ss 18 and 18A of the Customs and Excise
Act 91 of 1964. Both sections were amended with effect from 1 January
1996. The claims by SARS are thus governed by both the original
and
the amended provisions. The relevant provisions at the time are set
out below (I shall put words deleted by the 1995 amendment
in square
brackets, underline words added by the amendment and italicise words
for emphasis).
[10] ‘18
Removal
of goods in bond—(1) Notwithstanding anything to the
contrary in this Act contained –
the importer or owner of any
imported goods landed in the Republic or the manufacturer, owner,
seller or purchaser of any excisable
goods or fuel levy goods
manufactured in a customs and excise warehouse
or
the licensee of a customs and excise warehouse
in which dutiable goods are manufactured or stored may remove such
goods in bond to any place in the Republic appointed as a
place of
entry or warehousing place under this Act or to any place outside
the Republic: Provided that such goods manufactured
or stored in a
customs and excise warehouse may only be so removed to any such
warehousing place in the Republic or any place
in a territory in the
common customs area approved by the government of that territory for
rewarehousing at that place in another
customs and excise warehouse;
. . . .
(2) In addition to any liability
for duty incurred by any person under any other provision of this
Act,
the person who
removes any goods in bond in terms of subsection (1) shall, subject
to the provisions of subsection (3), be liable
for the duty on all
goods which he so removes.
(3) Subject to the provisions of
subsection (4), any liability for duty in terms of subsection (2)
shall cease
when it is
proved
[to the
satisfaction of the Commissioner]
by
the person concerned
–
(a) in the case of goods removed
to a place in the common customs area, that such goods have been duly
entered at that place; or
(b) in the case of goods which
were destined for a place beyond the borders of the common customs
area, that such goods have been
duly taken out of that area.
(4) If the person concerned
fails to submit any such proof as is referred to in subsection (3)
[within a period of thirty days from
the date on which the goods in
question were entered for removal in bond]
within
a period as may be prescribed by rule,
he shall upon demand by the [Commissioner] Controller forthwith pay
the duty due on such goods.
(5) No goods shall be removed in
bond in terms of this section from the place where they were landed
in the Republic or where they
entered the Republic until they have
been entered for removal in bond and such entry shall be deemed to be
due entry in respect
of such goods at that place for the purposes of
this Act.
(6) No entry for removal in bond
shall be tendered by or may be accepted from a person who has not
furnished such security as the
Commissioner may require and the
Commissioner may at any time require that the form, nature or amount
of such security shall be
altered in such manner as he may
determine.’
[11] The relevant provisions of s 18A are:
‘
Exportation of goods from
customs and excise warehouse – (1) Notwithstanding any
liability for duty incurred thereby by any
person in terms of any
other provision of this Act, any person who exports any goods from a
customs and excise warehouse to any
place outside the common customs
area shall, subject to the provisions of subsection (2), be liable
for the duty on all goods which
he so exports.
(2) Subject to the provisions of
subsection (3), any liability for duty in terms of sub-section (1)
shall cease when it is proved
[to the satisfaction of the
Commissioner] by the exporter that the said goods have been duly
taken out of the common customs area.
(3) If the exporter fails to
submit any such proof as is referred to in subsection (2) within a
period [of 30 days from the date
on which the goods concerned were
entered for export],
as
may be prescribed by rule
he shall upon demand by the Controller [Commissioner] forthwith pay
the duty due on those goods.
. . . .’
The principal effect of the 1995 amendments
2
to both ss 18 and 18A is that proof of removal does not have to be
‘to the satisfaction of the Commissioner’.
[12] Both sections 18 and 18A impose liability on a clearing agent
for importation and exportation unless it can prove that the
goods
concerned have been removed in bond or in transit. In
Standard
General Insurance Company Ltd
v Commissioner for Customs and
Excise
3
this court held that an agent is liable under s 18A, falling within
the meaning of a person who exports. Equally, an agent would
be
liable under s 18 as an importer. AMI accepts that it incurs
liability under both ss 18 and 18A. After the sections were amended
in 1995 it was sufficient for it to have furnished to customs
officials evidence of removal in bond or in transit in order to
obtain acquittals: proof ‘to the satisfaction of the
Commissioner’ was, as I have said, no longer necessary.
[13] AMI accordingly does not deny that it would have been liable for
payment of the duties in question had the goods concerned
not been
removed in transit or in bond. Its case is that it did remove the
goods, either in transit or in bond, and that it had
provided proof
of this to the relevant customs officials at the relevant times. Thus
the thrust of the argument is that although
AMI could no longer
produce the proof the only inference to be drawn, on the
probabilities, from a number of uncontroverted facts,
is that it had
once tendered the requisite proof and that SARS had accepted it at
the time.
[14] Before turning to the facts on which AMI relies, I should
indicate that in the high court AMI had argued that it did not bear
the onus of proving that the bills of entry in question had been
acquitted. (This was the argument abandoned on appeal.) Section
102(4) of the Act provides that in any dispute with the State as to
whether duty has been paid, or goods imported or exported,
‘it
shall be presumed that such duty has not been paid or that such goods
. . . have not been lawfully used, imported, exported
. . .’.
AMI argued that the ‘reverse onus’ imposed on it was
unconstitutional, particularly in the light of the
provisions of s
101 (read with rule 101.01) which require that business records and
documents need be retained for inspection only
for a period of two
years.
[15] The high court rejected this argument. At the hearing of the
appeal AMI accepted the validity of s 102(4) and conceded that
it
bore the onus of proving that the bills of entry in question had been
acquitted. It argued also that the claims of SARS had
prescribed and
that the decision to make the demands amounted to unfair
administrative action given the circumstances and delays
attendant on
the demands. It is necessary to discuss these two arguments only if
AMI’s contention that it had proved acquittals
in the past is
unsuccessful.
[16] I turn then to the facts. AMI acted as a clearing agent for the
import and export of goods. It attended to both the removal
of goods
in bond – that is, removal from one customs warehouse to
another in the common customs area – and to removal
in transit,
by road or rail, to a destination outside the common customs union.
It would give guarantees – bonds –
to serve as security
for the payment of duties if goods were not exported (sent out of the
common customs area) and removal-in-transit
bonds to secure payment
in respect of goods being sent out of the area.
[17] Before goods were removed in transit it would complete a form DA
570, with the purpose code ‘RIT’. Where goods
were
removed to a bonded warehouse within the area, the DA 570 would bear
the purpose code ‘RIB’. Where it attended
to the export
of goods to a destination outside the common customs area AMI would
complete a form DA 26.
[18] Mr A Caban, the manager in Africa of AMI for 34 years (and
previously a customs officer in Zambia) before his retirement in
2003, gave evidence about the business of AMI. He was not ever in
charge of the South African operations but was in a position
to
describe the pattern of transactions and the way in which goods were
cleared through customs. AMI’s main function was
to see to the
transit of cargo from ports, primarily Durban, to landlocked
countries in Africa. Caban testified that the AMI group
of companies
had a good reputation internationally, in the industry; that they had
a good client base and that they always attempted
to comply with the
customs laws of the countries in which they worked.
[19] Caban came to South Africa in 1998 when AMI ceased to trade here
in order to tidy up loose ends. He was also looking for a
partner for
AMI, which he found in Micor Shipping. A joint venture company was
formed – AMI Micor. All documentation in the
possession of the
former AMI offices in Durban were transferred to the AMI Micor
offices in Johannesburg. When the dispute arose
with SARS he had
attempted to locate the bills of entry in contention but many
documents had disappeared in the move. He did, however,
find two
registers. One was in respect of bills of entry, where dates,
reference numbers, file numbers, bills of entry numbers,
the importer
of the goods and the date when the bill was acquitted were all
reflected. The acquittals were recorded with red stamps
made by the
customs authorities together with signatures or initials of the
customs official. The register was handed in as an
exhibit. It covers
the period from November 1990 until May 1998. Caban said there was a
possibility that there were other bills
of entry registers used at
that time.
[20] The second register found, also handed in as an exhibit, was in
respect of the special removal bond number 202907 dated 19
November
1993. Caban explained that the bond was given as security for
removing goods. When they were cleared they had a value
on which
customs duty was payable. Caban described this as a notional amount –
a penal sum – calculated on the value
of the cargo and VAT on
that sum too. Goods could be removed only if the penal sum was less
than the value of the bond. Entry
of a penal sum would reduce the
value (the running balance) of the bond. If goods to be moved
exceeded the running balance, so
that the security would be
exhausted, then the goods could not be removed. But when the
acquittances from customs were received
they would be entered as
credits in the register.
[21] Thus each entry in the bond register reflected a bill of entry
number, the importer, the name of the vessel that had brought
the
cargo into South Africa, the reference number, the amount of the
penal sum, that of the penal sum credit, the running balance
at the
time and the date of each acquittal. The bond was for the sum of R2m.
But at the end of August 1998 the running balance
was in credit in
the sum of R4 532 320. Caban said that the conclusion to be drawn
from the fact of the large credit was that all
RIT entries (DA 570
forms) had been acquitted and all duties had been paid.
[22] This evidence was not countered by any witness for SARS. The
official who had confirmed the credit balance was not called
as a
witness, and there was no indication that the official was
unavailable. Mrs Vera Burger, who testified for SARS in relation
to
customs duties collection procedures and AMI’s documentation,
confirmed that unless customs officials were satisfied that
the bills
of entry had been acquitted they would not enter a credit in the bond
book. Any discrepancy between the acquittal register
and the bond
register could be explained by the lapse of time between the date of
the actual acquittal and the date when it was
entered in the bond
book.
[23] It was the bond book that was regarded by Caban as the proper
proof of acquittal: without the credit entries AMI would exceed
the
amount of the bond and not be able to remove goods in transit. That
the bond book was regarded as the basis for proving acquittal
was
also confirmed by another SARS witness, Mr B G Makhatini, who said
that after the dispute arose he had repeatedly asked Caban
for the
bond books.
[24] The loss of documents was attributable not only to AMI but also
to SARS. It did not have any records of non-acquittals. SARS
records
were, by the admission of its own witnesses, in a state of chaos.
This was in part due to the moratorium (from 1998 to
2002) on the
collection of duties put in place by SARS when an appeal against a
court decision was pending. Once the decision on
appeal had been
handed down SARS established what it called a ‘war room’
to hunt down unpaid duties. They enlisted
the aid of numerous
officials to clean out the backlogs. They drew up lists of
unacquitted entries and sorted them out in ‘agent
order’.
Burger conceded that many documents, including acquitted bills of
entry, could not be located. Yet some of these
had been entered in
the bond book and some, Burger conceded, would have been entered in
previous bond books.
[25] Mr D A Mooney, an employee of AMI, also said that SARS’s
record-keeping was deficient. While unable to testify about
the bills
of entry in issue, he did give evidence about the inability of SARS,
particularly the officials at Beit Bridge and Durban,
to keep track
of acquittals. He estimated that when SARS queried what it thought
were outstanding acquittals, in 90 per cent of
cases the acquittals
had already been given and recorded in the agent’s register.
The weight of his evidence was attacked
by SARS on the basis that it
was no more than similar fact evidence. But it was borne out by the
evidence of Burger and other SARS
officials.
[26] Most importantly, Makhatini, who was one of the SARS officials
who had worked in the ‘war room’, was able to find
19
acquittals in between the sending of the second demand and the third,
which he drafted – hence the demand for less than
half of what
was claimed in the second demand. This fact alone shows the parlous
state of record-keeping by SARS as also the failure
by SARS officials
to make proper checks before making demands.
[27] Furthermore, during the course of the trial yet another eight
acquittals were shown to have been made. This emerged from the
evidence of Professor Harvey Wainer, a chartered accountant and
Visiting Professor at the University of the Witwatersrand, who
was
engaged by SARS to analyse the records. He had worked on AMI’s
acquittance register. Wainer conceded that there could
justifiably be
discrepancies between dates of bills of entry and their dates of
acquittal: that was the case with a further five
bills that appeared
to have been acquitted.
[28] AMI thus contends that, although, through no fault of its own,
it can no longer tender proof of acquittals in respect of which
the
claims for duty were made, it had proved that it had done so at the
relevant times. This proposition is based on a number of
objective
factors which show, cumulatively, and on a balance of probabilities,
that no duties were payable and that SARS’s
demands were not
warranted. I have already dealt with the evidence on which the
contention is based. But to summarize:
[29] First, there was the large credit in the bond book in August
1998 when AMI ceased trading, and which a SARS official had confirmed
by signature. Second, between the date of the second and third
demands, Makhatini had found 19 acquittals, reducing the demand
by
almost 50 per cent. Third, it was established at the trial, when
Wainer gave evidence, that there were another eight bills of
entry
that had been acquitted. The acquittals register, although
incomplete, showed that most of the bills of entry in question
had
indeed been acquitted. And the bond book, which showed the large
credit, reflected that there was sufficient security –
the
bills of entry having been acquitted – for AMI to continue to
remove goods in bond or in transit. And lastly, the moratorium
on
demands between 1998 and 2002 resulted in chaos: thousands of bills
of entry were being checked, and there were 300-400 clearing
and
forwarding agents whose records were being checked. Documents were
admittedly lost. The SARS officials had clearly made mistakes.
[30] Moreover, as Caban testified – and this was not contested
– AMI was a reputable clearing and forwarding agent
which had
at all times complied with the customs laws of the countries in which
it operated. The only inference to be drawn from
all these factors is
that AMI had attended to the acquittal of all the bills of entry in
question at the relevant times and had
thus discharged the onus that
it bore under s 18(3) of the Act.
[31] I conclude, thus, that AMI has proved that it had acquitted all
the bills of entry referred to in the third demand, and is
not liable
for payment of the duties demanded.
[32] I turn then to the first demand, and the allegedly falsified
acquittals. SARS contended that four bills of entry for removal
in
bond (DA 570s) were falsely acquitted. The basis for the allegation
of falsification (which was not attributed to AMI) was that
the
stamps of the customs officials at the Beit Bridge border post on
these bills did not conform with the stamps that were actually
used.
Much evidence was led on the shape of the stamps, and transparencies
were produced to show what the genuine stamp should
look like. I do
not propose to deal with this evidence in any detail. The testimony
of Burger, and the SARS official at Beit Bridge,
Mrs M Vorster, was
inconsistent and Vorster contradicted herself in significant
respects. It was conceded that she was an unsatisfactory
witness.
There was no evidence led as to who would have falsified the stamps.
The transparencies and the stamps on the bills of
entry concerned do
not appear to differ in any significant way. They are all faint and
smudged. And SARS was unable to produce
a bill of entry with what it
contended was the true stamp.
[33] Who bears the onus of proving the falsification? SARS contended
that by virtue of s 102(4) AMI bore the onus of proving that
the
stamps were genuine, even though it had raised fraud as a defence.
But fraud is a special defence. The party who alleges fraud
must
plead and prove it:
Standard Bank v Du Plooy & another;
Standard Bank v Coetzee & another
4
and
Courtney-Clarke v Bassingthwaighte.
5
[34] In my view, once AMI had proved that it had removed the goods in
bond or in transit under s 18(3), it discharged the onus
that it bore
– it disproved the assumption created by s 102(4). When SARS
alleged fraud, which it did in the plea, it had
to prove that the
bills of entry had been falsely acquitted. I can see no reason why
the onus of proving fraud should shift from
SARS to AMI simply
because s 102(4) creates an assumption of liability that AMI must
disprove. Once AMI has proved acquittal the
usual rule must apply:
the fraud must be proved by the party making the allegation –
SARS. That it did not do. There was
no acceptable evidence adduced,
either documentary or through the witnesses Burger and Vorster, that
the stamps on the four bills
of entry had been falsified. SARS could
not claim duties in respect of those bills.
[35] I accordingly find that AMI has discharged the onus of proving
that the bills of entry reflected in the annexure to the third
demand
had been acquitted and that it was not liable for the payment of
duties claimed in the first demand and is consequently
not liable on
any of the bonds provided to SARS. The remaining arguments of AMI as
to prescription and unfair administrative action
thus fall away.
[36] (1) The appeal is upheld with costs including those of two
counsel where so employed.
(2) The order of the high court is replaced with the following:
‘(a) The plaintiff is not liable to pay to the first defendant
any of the customs duties and other charges reflected in Annexure
B
to the particulars of claim.
(b) The first defendant is to pay the costs of the action including
those occasioned by the employment of two counsel.’
_____________
C H Lewis
Judge of Appeal
APPEARANCES
APPELLANT: O Moosa SC
(with him
A
Boulle)
Instructed by Shepstone & Wylie, Durban
Webbers, Bloemfontein
RESPONDENTS: C J Pammenter SC
(with him T Mukadam)
Instructed by The State Attorney
Durban
The State Attorney
Bloemfontein
1
At certain stages the Controller (the person
designated by the Commissioner in an area) made the demands. I shall
refer to the
Commissioner, however, since he bore ultimate
responsibility and the Customs and Excise Act 91 of 1964 varies from
year to year
in respect of references to the Controller or to the
Commissioner.
2
By Act 45 of 1995.
3
2005 (2) SA 166
(SCA).
4
(1899) 16 SC 161
at 166.
5
1991 (1) SA 684
(Nm) at 689F-G. See also
Amler’s
Precedents of Pleadings
7 ed (2010) by
L T C Harms p 215.